Yes. The minimum margin requirement for future contract usually is 10%, but let's say you have to put up 20% for Bitcoin future. The Bitcoin spot price current is at $20K, and you only need 4k to trade one. One day one guy shorts 10 contracts for 40K, then the price suddenly shoots up 30%. This guy got a margin call and is wiped out immediately. His account only have money to cover 20%, so the other 10% will need to come out from the brokerage company such as Interactive Broker. Peterffy is worried about the extreme situation because the Bitcoin market is a thin market.
Yes that is the point though, the market is way too small to bring down the global economy. The housing market that took us down in the 08 crisis was in the trillions. This is barely in the hundreds of billions.
The Bitcoin future trading market is a cash settled derivative market. It has nothing to do with the Bitcoin spot market. People can bid in trillions in future market despite the Bitcoin spot market is in billions. As long as there is one seller matching one buyer for a contract, the brokerages can sell billions of these kind of contracts if they are crazy enough.
Yes. The minimum margin requirement for future contract usually is 10%, but let's say you have to put up 20% for Bitcoin future. The Bitcoin spot price current is at $20K, and you only need 4k to trade one. One day one guy shorts 10 contracts for 40K, then the price suddenly shoots up 30%. This guy got a margin call and is wiped out immediately. His account only have money to cover 20%, so the other 10% will need to come out from the brokerage company such as Interactive Broker. Peterffy is worried about the extreme situation because the Bitcoin market is a thin market.
Yes that is the point though, the market is way too small to bring down the global economy. The housing market that took us down in the 08 crisis was in the trillions. This is barely in the hundreds of billions.
The Bitcoin future trading market is a cash settled derivative market. It has nothing to do with the Bitcoin spot market. People can bid in trillions in future market despite the Bitcoin spot market is in billions. As long as there is one seller matching one buyer for a contract, the brokerages can sell billions of these kind of contracts if they are crazy enough.